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Wednesday, July 18, 2012

something on Personal Income Tax filing, Wealth tax and form 26AS

In life ‘tax’ is more certain than death. The  deadline for filing tax returns approaches, and we in our usual way would postpone things till the last moment and there will serpentine queues in the Income Tax office counters – to file our returns and obtain the statutory acknowledgement from the authorities.   There would be mad scramble – sure you know that e-filing for income over 10 lakhs has been made mandatory. Of course, persons below this also can e-file their returns.  This years budget had proposed that individuals who have assets abroad must file their tax return and mention details of their foreign assets in the forms.

E-filing for income over 10 lakh  :  Any individual or Hindu Undivided Family (HUF) with an annual income of 10 lakh and above will now have to compulsorily e-file the income tax return. The government wants to nudge taxpayers to e-file because it improves tax compliance and reduces its own back-office workload. When returns are filed physically, data entry operators manually feed the information into the system. In the process, they add more  mistakes in  capturing what is stated in the return, which leads to delays in refunds or, even  a notice from the tax department.

One cannot find a great logic in introduction of declaration of foreign assets which should include - bank accounts, immovable property and interest in any company. The taxpayer will have to mention the peak bank balance in his account during the year as well as the total investment in other assets at cost price. By introducing this change, the government intends to track the undisclosed income from these assets and the Govt expects that people will honestly disclose their assets stashed abroad.

Before you e-file or file your returns, check your Form 26AS which is available online.  In case you do not know, Form 26AS is the consolidated tax statement issued under Rule 31 AB of Income Tax Rules to PAN holders. This statement with respect to a financial year will include details of:
a) tax deducted at source (TDS);
b) tax collected at source (TCS); and
c) advance tax/self assessment tax/regular assessment tax etc. deposited in the bank by the taxpayers (PAN holders).

The Form 26AS (Annual Tax Statement) is divided into three parts -  Part A displays details of tax which has been deducted at source (TDS) by each person (deductor) who made a specified kind of payment to you.  Part B displays details of tax collected at source (TCS) by the seller of specified goods at time these goods have been sold to you. Part C displays details of income tax directly paid by you (like advance tax self assessment tax) and details of the challan through which you have deposited this tax in the bank.

So it is a place where  all your tax particulars get updated online and is useful source ensuring that the credits available in the tax statement  are the ones deducted and deposited to the account of the Govt.  In future you will be able to use this consolidated tax statement (Form 26AS) as a proof of tax deducted/collected on your behalf and the tax directly paid by you along with your income tax return after the need for submission of TDS/TCS certificates and tax payment challans along with income tax returns has been dispensed with by the Income Tax Department (ITD).  However as of now for claiming the credit for tax deducted/collected at source you may be required to enclose TDS/TCS certificates (Form 16/16A) issued to you by the deductor

Your PAN no. is the unique identity for this source of database.  Check your form 26AS Online at :

----- another thing which not many people notice still, is filing of ‘Wealth tax’ of course only for those who have wealth and not debts…. If you own certain assets worth more than 30 lakh,you are liable to pay wealth tax and file your return by July 31.  Remember that non-payment of wealth tax [when liable] can lead to serious problems with the penalty ranging from 100% to 500% of the unpaid tax. In extreme cases of willful default,a taxpayer may be punished with imprisonment ranging from six months to seven years even

Often we tend to think of the benefits of investing on land as property but it carries a greater tax implication, especially that of a second property.  A second house wont attract wealth tax only if it is rented out for at least 300 days in a year.  So if it is kept vacant, not only does one lose revenue but also would have it included in his assets and become assessable for the wealth tax.  The current limit is Rs.30 lakhs and one has to pay 1% value on the assets exceeding this threshold limit. 

The taxable assets include :
- Urban Land (that is, non agricultural land)
- Residential or commercial property
- Jewellery, bullion, furniture, utensils and any other article made wholly or partly of gold, silver, platinum or any other precious metal
- Cars, Aircrafts, Yachts
- Cash in excess of Rs 50,000 (this is cash in hand and not in the bank)
- Only if these assets are located in India would you fall under the purview of Wealth Tax in India.

The value of taxable assets for the purpose of wealth tax would be their value as on the last day of the respective financial year (FY). Further, such value of assets (except cash) will have to be determined in accordance with the valuation norms laid down in the Wealth Tax Act. In determining the value of the assets, debts owed by the assessee in respect of assets chargeable to tax are reduced from the taxable value of the assets.  So if you have bought a high value property on loan, the outstanding value of the loan as at March 31 of the FY will go on to reduce the value.  To check if you are liable to pay wealth tax, you have to compute the market value of your assets.

The original Direct Taxes Code proposal was  to raise the threshold of assets for wealth tax to 50 crore and reduce the tax to 0.25%.

With regards – S. Sampathkumar.


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